Our industry is engaged in an important dialogue to improve sustainability through ESG transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
Unstoppable Trend on Digitalization
Digitalization is undoubtedly becoming a trending topic in companies’ business across the globe. According to a study by Research Institute IDC, it is predicted that the amount of data generated by the world in 2025 will reach 175ZB, which will be 61 times of 2018. In this case, how companies use data to seek value and opportunities becomes the key to success in the digital age. As digital transformation becomes a global megatrend, how the management leads the innovation would affect business development, as well as efficiency and competitiveness of a company, which is an important strategic deployment that cannot be ignored.
Digitalization and Sustainability: Positive Mutual Reinforcement
Digital Transformation could facilitate and improve the operational performance of corporates. By adopting effective strategies in digitalization, positive impacts on environmental sustainability could be brought about. First of all, digitalization could effectively reduce net CO2 emissions from electricity, logistics and transportation. For instance, artificial intelligence (AI) could optimize driver behavior, whereas real-time road traffic system could avoid traffic jams and choose alternative routes. In addition, digitalization could enhance data coverage and availability for better time and data management. Through the implementation of smart meters or building systems, such as Building Management System or BIM-enabled facility management, companies can optimize energy usage and effectively manage the vast amount of data. It helps identify leakage or any other abnormality and observe consumption patterns, as well as helps set up quantitative ESG targets and KPIs, which is a better interpretation to drive ESG performance and risk management. Besides, along with an AI system, companies can easily analyze supply chain operation and provide improvement options, while digitalizing ESG disclosure to facilitate communication and transparency through e-Sustainability Report and online media to convey the messages more directly.
In recent years, Digital Transformation has become the leading and rising trend in Hong Kong. According to KPMG’s third annual Global PropTech Survey, real estate companies show progress with digital strategies and they are increasing their engagement with digital platforms, with 58 percent stating that they have a digital strategy in place, up from 52 percent in 2018. It is also found that 95 percent of real estate companies have assigned a responsible party for leading digital transformation and innovation, although in most cases (around 65 percent) they are not digital or technology specialists. For instance, New World Development has integrated digitalization into daily operations by adopting the digital strategies for its core businesses over the past two years, featuring the use of Internet and social media for promotion and communications. It has also established “i.World”, a social media platform for all internal staff of the Group’s Hong Kong and mainland China offices, to promote The Artisanal Movement brand concepts and announce the latest human resources initiatives.
Possible Challenges and Suggestions to Improve the Digitalization Coverage
Nevertheless, every coin has two sides. The convenience under the digital era could generate risks and pose threats to different sectors, such as unequal access to the Internet, lack of global technology governance framework, and cybersecurity risks. Environmental impacts of digital technology such as the growing amount of e-waste and increasing volumes of toxic chemicals released, as well as the unethical use of digitalization are also causing concerns. However, the risks are believed to be mitigated by establishing well-planned digital risk management and framework. With reference to the report prepared by Deloitte, Deloitte’s digital risk framework considers 10 risk areas, including strategic, technology, operations, third party, regulatory, forensics, cyber, resilience, data leakage, and privacy. Based on the applicable risk areas for digital initiatives, different control measures will be designed as per leading standards and industry practices. Despite all the challenges and risks that the evolving environment presents, corporates cannot overlook the opportunities that ‘moving to digital’ brings forth along with the profound impact that it shall have on them.
With the aim of making Hong Kong a smart city, it is believed that the traditional mindset should be changed. Corporates shall understand, and apply the benefits of digitalization in many other ways to achieve sustainable development, such as applying green IoT property management to enhance the efficiency of resources consumption and operational performance, and ultimately improve tenant satisfaction, as well as better inform the decision-making process and accelerate the process of taking further actions. Furthermore, the application of AI should be accelerated in the market. The positive impact of digitalization could be maximized by using AI for ESG data analysis, research and development, as well as risk management. According to a report published by PwC, it has identified 80 ways in which AI technologies could be used to benefit the environment, including optimized energy system forecasting, demand-response charging infrastructure in transportation, analytics and automation for smart urban planning, and so forth. Last but not least, applying digitalization in green finance should be encouraged. The potential of fintech and blockchain can facilitate access to new sources of finance and investment, which can build the capacity for accelerating digitalization.
Catering to the Smart City Blueprint initiated by the Government of the Hong Kong Special Administrative Region, we shall all strive together to build Hong Kong a world-class smart city, in hopes of improving the sustainability performance of the city and enhancing the health and well-being of the people.
IDC (2018) The Digitalization of the World – From Edge to Core https://www.seagate.com/files/www-content/our-story/trends/files/idc-seagate-dataage-whitepaper.pdf
PwC (2018) Fourth Industrial Revolution for the Earth – Harnessing Artificial Intelligence for the Earth https://www.pwc.com/gx/en/sustainability/assets/ai-for-the-earth-jan-2018.pdf?utm_campaign=sbpwc&utm_medium=site&utm_source=articletext
Deloitte (2018) Managing Risk in Digital Transformation https://www2.deloitte.com/content/dam/Deloitte/in/Documents/risk/in-ra-managing-risk-in-digital-transformation-1-noexp.pdf
KPMG (2019) Is Your Digital Future in the Right Hands? https://assets.kpmg/content/dam/kpmg/uk/pdf/2019/11/global-proptech-survey-2019.pdf
This article was written by Allied Environmental Consultants Limited.